KNOC Eyes Underground LNG Storage
Secures competitive edge in constructing oil storage facilities

Korea may be able to construct underground liquefied natural gas (LNG) facilities, a sector considered to be some risky but feasible, according to a prediction by an executive of Korea National Oil Corp. (KNOC). "Construction of underground liquefied natural gas (LNG) storage facilities is somewhat risky due to no precedents, but it is not only possible technically, but also Korea can do it on its own. Considering no technological problems, Korea is most likely to secure a competitive edge in building such facilities in Korea and in the global market,"Lee Yu-rak, executive vice president for engineering and construction at KNOC, said.
The corporation has also made strenuous efforts to secure the technology for construction of LNG storage facilities in a safer and cost-saving way in the event that the global LNG industry could shift from a buyer's market into a seller's market due to an explosive surge in LNG consumption in the wake of an international protocol on climate change designed to reduce fossil-fueled energy sources, the causes of the pressing global warming issue.
Lee said, "North European countries have made no progress in developing related technologies as they finished constructing petroleum storage facilities in the late 1970s. On the other hand, Korea, petroleum storage builder and operator, has acquired a competitive edge with technologies of constructing oil storage facilities at a lower rate as it has focused on minimizing drawbacks by making a feedback in construction on top of employing advanced engineering methods and sophisticated equipment."The division is exerting itself to make experiences and technology it has acquired with taxpayer's money for the past 25 years a backbone in making investments into overseas storage bases construction, he said. The following are the excerpts of KNOC executive vice president Lee? interview with NewsWorld.
Question: Would you explain the current status of KNOC's Engineering and Construction Division and this year's major business plans?
Answer: KNOC was inaugurated in March 1979 as a state-invested corporation to secure a stable supply of petroleum following the two oil shocks that hit the Korean economy during the 1970s.
Since its reception, the corporation has played a pivotal role in the development of the national economy by conducting oil exploration business in domestic and abroad to secure a stable supply of energy sources, stockpiling petroleum in case of a national contingency and carrying out projects designed to overhaul the distribution structure for the sound development of the domestic petroleum industry.
In particular, KNOC has stabilized domestic petroleum supplies and the people's living by releasing stockpiled petroleum timely in the event of contingencies, as was the case with the disruption of oil supplies during the Gulf War that broke out in the early 90s.
The Engineering and Construction Division is composed of two departments, five construction offices and a task force. They are manned by about 90 construction engineers. Starting with construction of the Ulsan overground storage tanks in 1980, the division has constructed 15 petroleum storage facilities, including the Geoje Stockpiling Facility, the largest- single unit, underground cavern, for the past 25 years.
KNOC is credited with having constructed and operated petroleum storage facilities with a combined capacity of some 100 million barrels without large accidents and leakage. In an effort to raise its petroleum stockpiling capacity to 146 million barrels by 2007, the corporation has pushed ahead with petroleum storage construction projects as it has selected storage sites in five areas - Seosan, Yeosu,Geoje, Ulsan and Pyeongtaek.
The major projects the corporation has implemented during this year include construction of storage facilities in Geoje and Yeosu, now under way, capable of stockpiling 7.5 million barrels and 16.5 million barrels, respectively, and completion of a petroleum storage facility with a capacity of 14.6 million barrels next month without a hitch. They are designed to build up a petroleum logistic hub for Northeast Asia. The planned petroleum storage facilities in Ulsan and Pyeongtaek, each capable of stockpiling 6.5 million barrels and 1.8 million barrels, will break ground within this year.
KNOC has accelerated construction of a gas production facility in Vietnam in time for gas production starting 2006.
Q: Would you be specific about the Engineering and Construction Division's technology development situation?
A: Korea's construction of underground storage facilities was at an embryonic stage in the early 1980 when KNOC constructed its first petroleum stockpiling facility. At that time, the corporation relied on technology consultation by North European countries such as Norway, which had already accumulated technology of constructing underground storage bases since no manpower with expertise in constructing a tunnel, 18 meter wide and 30 meters high, was available in Korea.
However, KNOC's experience and expertise accumulated during 25-year-old construction of underground storage bases has contributed to the development of the technology related to underground tunnel construction. The new tunneling technology, NATM (New Austrian Tunneling Method) replaced the conventional tunneling method, while automatic mechanic 3-BOOM drill and wet and SFRS (Steel Fiber Reinforced Shotcrete) tunneling method were introduced to redouble safety and efficiency of tunnel construction. The corporation has reinvented construction sites by developing and importing such new numerous technologies as Swellex Bolt, Q-System and Super-Cut engineering method, which has led to the development of upgraded technologies related to ordinary road tunnel, subway, military bunker and high-speed railway KTX. The division acquired five patents on tunneling technologies, including the one on borehole televiewer.
Q: Would you elaborate on your division's business prospects and mid- and long-term strategies?
A: The division is exerting itself to make experiences and technology it has acquired with taxpayer's money for the past 25 years a backbone in making investments into overseas storage bases construction. The significance of stockpiling petroleum in a national strategy of securing energy security following a rapid rise in petroleum consumption is getting higher and Asian counties like China and India have begun to show a keen interest in Korea's advanced technologies related to petroleum stockpile, as Korea had done 25 years ago.
North European countries have made no progress in developing related technologies as they finished constructing petroleum storage facilities in the late 1970s. On the other hand, Korea, petroleum storage builder and operator, has acquired a competitive edge with technologies of constructing oil storage facilities at a lower rate as it has focused on minimizing drawbacks by making a feedback in construction on top of employing advanced engineering methods and sophisticated equipment.
The corporation has also made strenuous efforts to secure the technology for construction of LNG storage facilities in a safer and cost-saving way in the event that the global LNG industry could shift from a buyer's market into a seller's market due to an explosive surge in LNG consumption in the wake of an international protocol on climate change designed to reduce fossil-fueled energy sources, the causes of the pressing global warming issue.
Construction of underground LNG storage facilities is somewhat risky due to no precedents, but it is not only possible technically, but also Korea can do it on its own. Considering no technological problems, Korea is most likely to secure a competitive edge in building such facilities in Korea and in the global market.
KNOC has made a spectacular feat in petroleum and gas production facility construction in 2003 - successfully building the Donghae-1 gas field with a reserve capable of supplying 250 billion cubic feet, an equivalent of 5 million tons of LNG, for the next 15 years to the Ulsan and South Gyeongsang Province area.
On top of its achievement in Korea, the corporation is now building a production facility in Vietnam 11-2 Block with a reserve of 856 billion cubic feet (17 million tons of LNG) three times as much as that of Donghae-1 gas field with completion slated for next September.
The corporation's construction of petroleum and gas production facilities is expected to rise due to its expanded petroleum exploration and development. And KNOC is expected to have a technological competitive edge, and its Engineering and Construction Division will lay a foundation for developing KNOC into the global top 50 majors.
Q: What's your business motto and would you explain about your company's corporate culture?
A: I see that the most important thing for engineers is what they have achieved on their own efforts. Historically speaking, any nations favoring engineers have become advanced countries. Korea could achieve a vision of raising its national income to $30,000 if the resources-scarce nation secures its own technologies in all sectors.
The difference between the genius and the mediocre is said to depend on concentration. I believe that everyone can achieve whatever they do if they are determined, sincere, consistent and with passion. Our division has a growth potential, given the achievements it has made. I will do as an executive in charge of the division the following in a bid to help the division make most of its potential.
Firstly, the division will create an environment in which staff members share a common goal and values on top of clarified vision and they work for achieving the vision by themselves.
Secondly, it will focus on educating staff members on expertise for their future growth and research. The division will provide support in securing manpower in such specialized sectors as project management professionals (PMP) and construction management (CM) and nourish them as leaders.
Thirdly, I stress changes and innovations. We are entering a rapidly changing era, as Bill Gates predicted that things would change in the next decade faster than they did for the past 50 years. We will have to go the extra mile in making the division an organization braving changes for it survival and corresponding to a globalization era of unlimited competition. nw

Lee Yu-rak, executive vice president for engineering and construction at KNOC.

KNOC has set in motion the production of the Donghae-1 gas field on the continental shelf of Korea for the first time in Korea.